Born in 1956, Michael Marcus is a Forex and commodities trader who have turned his initial $30,000 into $80 million in less than 20 years. Michael Marcus’s mentor was the legendary Ed Seykota.

 

Michael Marcus Trading Tips

 

■ The best trades are the ones in which you have all three things going for you: fundamentals, technicals, and market tone.

1. First, the fundamentals should suggest that there is an imbalance of supply and demand, which could result in a major move.
2. Second, the chart must show that the market is moving in the direction that the fundamentals suggest.
3. Third, when news comes out, the market should act in a way that reflects the right psychological tone. For example, a bull market should shrug off bearish news and respond vigorously to bullish news.

If you can restrict your activity to only those types of trades, you have to make money, in any market, under any circumstances. There will always be trades that meet those requirements, but there may be fewer of them, so you have to be much more patient.

 

■ Determine what the central banks are going to do

Nowadays, I try to avoid the currencies, because I feel it is a totally political situation; you have to determine what the central banks are going to do.

 

 

■ The big players, including the governments, would always tip their hand

If we saw a surprise price move against us that we didn't understand, we often got out and looked for the reason later.

 

■ Be Contrarian

When the news is wonderful and a market can't go up, then you want to be sure to be short.

 

■ The trend-following systems approach doesn't work anymore

The problem is that once you have defined a trend and taken a position, everyone else has taken a position as well. Since there is no one left to buy, the market swings around in the other direction and gets you out. One reason we don't have many good trends anymore is that the central banks are preventing currency moves from getting out of hand by taking the other side of the trend.

 

■ You develop an almost subconscious sense of the market on the floor

You learn to gauge price movement by the intensity of the voices in the ring. For example, when the market is active and moving, and then gets quiet, that is often a sign that it is not going to go much further. Also, sometimes when the ring is moderately loud and suddenly gets very loud, instead of being a sign that the market is ready to blast off, as you might think, it actually indicates that the market is running into a greater amount of opposing orders.

 

■ You have to consider whether the market has already discounted your idea

Always ask yourself: "How many people are left to act on this particular idea?". You can evaluate that by using the classic momentum-type indicators and observing market tone. How many days has the market been down or up in a row? What is the reading on the sentiment indexes?

 

■ Trade assets that are not dominated by the big professional traders

I don't trade the Dow stocks. I prefer the little ones because they are not dominated by the big professional traders who are like sharks eating each other. The basic principle is that it is better to trade the Australian dollar than the Deutsche mark, and the small OTC stock than the big Dow stock.

 

Money Management Trading Tips

■ Bet less than 5 percent

Always bet less than 5 percent of your money on an idea.

 

■ Get out if you become unsure about a position

If a position doesn't feel right as soon as you put it on, don't be embarrassed to change your mind and get right out. If you become unsure about a position, and you don't know what to do, just get out.

 

■ Hold on to your winners and cut your losers

Perhaps the most important rule is to hold on to your winners and cut your losers. Both are equally important. If you don't stay with your winners, you are not going to be able to pay for the losers.

 

 

■ Michael Marcus (Forex & Commodities Trader)

Source: Market Wizards, Jack D. Schwager

Forex-Investors.com (c)